Gross Domestic Product Tops Expectations at 2.9% Annualized Rate

The consumer and the nation's exports are the headliners in third-quarter GDP which topped expectations at an annualized 2.9 percent. Personal consumption expenditures rose at a solid 2.1 percent annualized rate led by the all important durables component which surged at a 9.5 percent rate. Personal consumption was the largest contributor in the quarter, adding 1.5 percentage points to the quarter's rate.

Boosted by foods and specifically soybeans, exports rose at a double-digit 10.0 percent rate, more than offsetting a 2.3 percent rise in imports as net exports added 0.8 percentage points to the quarter.

Another important positive in the report is a second straight quarter of improvement in what has been the long lagging business investment component. Contributing 0.2 percentage points to GDP, nonresidential fixed investment rose at a 1.2 percent rate on top of the second-quarter's 1.0 percent rate. Inventory change was also a positive in the quarter (0.6 point contribution) as were government purchases (contributing 0.1 percentage points). A negative for a second straight quarter was residential investment, falling at a 6.2 percent rate and pulling GDP down by 2 tenths.

Final demand rose a solid 2.3 percent, down only 3 tenths from the second quarter. The price index, at an expected 1.5 percent rate, fell back from the 2.3 percent rate of the second quarter.

The third quarter started off slowly but gained momentum in a curve that points to favorable momentum for the fourth quarter. The quarter's 2.9 percent rate is the strongest since the third quarter of 2014.

Recent History Of This Indicator:
The Econoday consensus for the first estimate of third-quarter GDP is plus 2.5 percent, a solid rate that what would be the highest in five quarters. Consumer spending is expected to be solid but still down from the second-quarter's very strong 4.4 percent annualized growth rate. Nonresidential investment was a plus in the second quarter but is expected to be a negative in the third quarter. The GDP price index accelerated sharply in the second quarter reflecting energy prices, to plus 2.3 percent from the second quarter's plus 1.4 percent but is expected to move sharply lower in the third quarter, to a consensus plus 1.5 percent.